Research Interests:
Research Interests:
This paper presents a model that measures the impact of political risk on portfolio investment when the political risks are multivariate a nd c orrelated across countries. The multivari ate approach generalizes the single country model... more
This paper presents a model that measures the impact of political risk on portfolio investment when the political risks are multivariate a nd c orrelated across countries. The multivari ate approach generalizes the single country model but retains most of its characteristics in t erms of its ab ility t o price political risk based on the stochastic process of
Research Interests:
The aim of this paper is to develop a model for analyzing multiple response models for count data and that may take into account complex cor- relation structures. The model is specified hierarchically in several layers and can be used for... more
The aim of this paper is to develop a model for analyzing multiple response models for count data and that may take into account complex cor- relation structures. The model is specified hierarchically in several layers and can be used for sparse data as it is shown in the second part of the paper. It is a discrete multivariate response
Research Interests:
ABSTRACT A general method for generating approximation algorithms for integral calculations is proposed here, starting from weak convergence results and then adjusting the integral calculations such that the Gaussian probability kernel... more
ABSTRACT A general method for generating approximation algorithms for integral calculations is proposed here, starting from weak convergence results and then adjusting the integral calculations such that the Gaussian probability kernel appears inside the integral. While this technique can be applied in a wide applied mathematical context we focus here on European option pricing as a class of applications. We prove that the weak convergence characterizing condition can still be applied under some mild assumption on the payoff function of financial options. It is also shown that the approximation grid is a dense set in the set of real numbers.
Quantitative financial calculus is dominated by calculations of integrals related to various moments of probability distributions used for modelling. Here, we develop a general technique that facilitates the numerical calculations of... more
Quantitative financial calculus is dominated by calculations of integrals related to various moments of probability distributions used for modelling. Here, we develop a general technique that facilitates the numerical calculations of options, prices for the difficult case of multi-assets, for the majority of European payoff contracts. The algorithms proposed here rely on known weak convergence results, hence making use of the gaussian probability kernel even when modelling with non-gaussian distributions. In addition, this technique can be employed for calculating greek parameters. We prove that the weak convergence characterizing condition can still be applied under some mild assumption on the payoff function of financial options.
Research Interests:
Research Interests:
ABSTRACT
Research Interests:
... The underwriter of a balance guaranteed swap is exposed to the amortization speed on the reference mortgage loan portfolio. View larger version (15K). Exhibit 1. ... Jim Clayton, S. Michael Giliberto, Jacques N Gordon, Susan... more
... The underwriter of a balance guaranteed swap is exposed to the amortization speed on the reference mortgage loan portfolio. View larger version (15K). Exhibit 1. ... Jim Clayton, S. Michael Giliberto, Jacques N Gordon, Susan Hudson-Wilson, Frank J Fabozzi, Youguo Liang. ...
Research Interests:
Index-linked securities are offered by banks, financial institutions and building societies to investors looking for downside risk protection whilst still providing upside equity index participation. This article explores how reverse... more
Index-linked securities are offered by banks, financial institutions and building societies to investors looking for downside risk protection whilst still providing upside equity index participation. This article explores how reverse cliquet options can be integrated into the structure of a guaranteed principal bond. Pricing problems are discussed under the standard Black-Scholes model and under the constant-elasticity-of-variance model. Forward start options are the main element of this structure and new closed formulae are obtained for these options under the latter model. Risk management issues are also discussed. An example is described showing how this structure can be implemented and how the financial engineer may forecast the coupon payment that will be made to investors buying this product without exposing the issuing institution to risk of loss.
Research Interests:
The departure from the log-normal distribution for option pricing has been largely driven by empirical observations on skewness. Weibull distribution and the generalized beta distribution have been used recently to fit the risk-neutral... more
The departure from the log-normal distribution for option pricing has been largely driven by empirical observations on skewness. Weibull distribution and the generalized beta distribution have been used recently to fit the risk-neutral density from option prices. Here we propose the use of the generalized gamma distribution for recovering the risk-neutral density. In terms of complexity, this distribution, having three parameters, falls between the Weibull and generalized beta. New op- tion pricing formulas for European calls and puts are derived under the generalized
Research Interests:
In this paper hypothesis tests are proposed for discrimination between the populations of two Alpha distributions. This distribution is used for highly skewed data. The tests developed here are uniformly most powerful unbiased and can be... more
In this paper hypothesis tests are proposed for discrimination between the populations of two Alpha distributions. This distribution is used for highly skewed data. The tests developed here are uniformly most powerful unbiased and can be used to test various general hypotheses related to this probability distribution which is less known by professional statisticians.
Research Interests:
The generalized Rayleigh distribution is a two-parameter family of distributions having Rayleigh, Maxwell and chi-square distributions as particular cases. We propose uniformly most powerful unbiased tests for discriminating between the... more
The generalized Rayleigh distribution is a two-parameter family of distributions having Rayleigh, Maxwell and chi-square distributions as particular cases. We propose uniformly most powerful unbiased tests for discriminating between the parameters θ of two generalized Rayleigh distributions, conditional on the value of parameters k.
In this paper we model political risk for international capital budgeting as the value of a hypothetical insurance policy that pays the holder any and all losses arising from political events. We address three important aspects of... more
In this paper we model political risk for international capital budgeting as the value of a hypothetical insurance policy that pays the holder any and all losses arising from political events. We address three important aspects of political risk that are widely acknowledged in the literature but either missing or incomplete in existing mathematical models: 1) loss causing political events
Research Interests:
... Risk Management in Freight Markets with Forwards and Options Contracts. Juby George 1 ,; Radu Tunaru Senior Lecturer PhD 2. Published Online: 15 SEP 2008. DOI: 10.1002/ 9780470404324.hof003012. Copyright © 2008 John Wiley &... more
... Risk Management in Freight Markets with Forwards and Options Contracts. Juby George 1 ,; Radu Tunaru Senior Lecturer PhD 2. Published Online: 15 SEP 2008. DOI: 10.1002/ 9780470404324.hof003012. Copyright © 2008 John Wiley & Sons, Inc. All rights reserved. Book ...
Research Interests:
The main objective of this research is to identify probability dis- tributions that are capable to handle negative and positive skewness and can be applied to model the risk-neutral density function. The investigation will focus on... more
The main objective of this research is to identify probability dis- tributions that are capable to handle negative and positive skewness and can be applied to model the risk-neutral density function. The investigation will focus on comparing the flt of these distributions pro- vide in practice for fltting risk neutral densities with a view on pricing derivatives. The models are
Research Interests:
ABSTRACT This article describes a new methodology to compute the value at risk and the expected shortfall using a power transformation technique. The methodology is an improvement of a recent method employing Johnson's system of... more
ABSTRACT This article describes a new methodology to compute the value at risk and the expected shortfall using a power transformation technique. The methodology is an improvement of a recent method employing Johnson's system of distributions and is based on the idea of matching exactly the first four moments of the target portfolio distribution. The performance of this method is investigated in the context of jump-diffusion models with lognormal jumps. The authors show that it yields valid densities and quantile functions and that it is also superior to other techniques proposed in the literature, such as Cornish Fisher, Gram-Charlier, and Johnson distributions, in terms of relative error to the analytical benchmark. The power transformation is also applied to forecasting VaR for three equity indexes at different critical levels. The backtesting results support the validity of the newly proposed method.
Research Interests:
Research Interests:
Research Interests:
Research Interests:
Research Interests:
... The underwriter of a balance guaranteed swap is exposed to the amortization speed on the reference mortgage loan portfolio. View larger version (15K). Exhibit 1. ... Jim Clayton, S. Michael Giliberto, Jacques N Gordon, Susan... more
... The underwriter of a balance guaranteed swap is exposed to the amortization speed on the reference mortgage loan portfolio. View larger version (15K). Exhibit 1. ... Jim Clayton, S. Michael Giliberto, Jacques N Gordon, Susan Hudson-Wilson, Frank J Fabozzi, Youguo Liang. ...
Research Interests:
Research Interests:
Research Interests:
Research Interests:
1 The Evolution of International Political Risk 1956-2001 Ephraim Clark & Radu Tunaru1 Abstract ... Calvo and Mendoza (2000), for example, show how the costs of gathering and processing country risk information can cause herding behavior... more
1 The Evolution of International Political Risk 1956-2001 Ephraim Clark & Radu Tunaru1 Abstract ... Calvo and Mendoza (2000), for example, show how the costs of gathering and processing country risk information can cause herding behavior even among rational investors. ...
Research Interests:
Research Interests:
Research Interests:
Research Interests:
Research Interests:
Research Interests:
Research Interests:
ABSTRACT Edgeworth binomial trees were applied to price contingent claims when the underlying return distribution is skewed and leptokurtic, but with the limitation of working only for a limited set of skewness and kurtosis values.... more
ABSTRACT Edgeworth binomial trees were applied to price contingent claims when the underlying return distribution is skewed and leptokurtic, but with the limitation of working only for a limited set of skewness and kurtosis values. Recently, Johnson binomial trees were introduced to accommodate any skewness-kurtosis pair, but with the drawback of numerical convergence issues in some cases. Both techniques may suffer from non-exact matching of the moments of distribution of returns. A solution to this limitation is proposed here based on a new technique employing Hermite polynomials to match exactly the required moments. Several numerical examples illustrate the superior performance of the Hermite polynomials technique to price European and American options in the context of jump-diffusion and stochastic volatility frameworks and options with underlying asset given by the sum of two lognormally distributed random variables.
Research Interests:
Research Interests:
In this paper we test for the most effective cross hedging instrument for the Singapore spot market in jet fuel over the period February 4, 1997 to August 21, 2001. Our results are mixed. We find that the heating oil contract is the best... more
In this paper we test for the most effective cross hedging instrument for the Singapore spot market in jet fuel over the period February 4, 1997 to August 21, 2001. Our results are mixed. We find that the heating oil contract is the best in-sample cross-hedging instrument. It has the ...